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American Midstream Gains NatGas Infrastructure On, Offshore Eastern Gulf Coast

American Midstream Partners LP is bulking up on natural gas and oil midstream properties that serve the eastern Gulf of Mexico (GOM) in a $115 million deal with DCP Midstream LLC.

The transaction, set to close in August, complements the Denver-based operator's High Point system in Southeast Louisiana, which serves the eastern GOM.

"The acquisition is consistent with our growth strategy to pursue third-party and bolt-on opportunities, and upon closing the acquisition we will have the ability to offer oil gathering and natural gas processing services to offshore producers, which will allow us to more effectively compete for deepwater Gulf of Mexico production," said American Midstream CEO Steve Bergstrom.

The acquisition from DCP affiliates includes:

Mobile Bay 300 MMcf/d gas processing plant in Mobile County, AL, now operating at nearly 70% of capacity;

Dauphin Island gathering and transmission system (DIGP), a 270-mile gathering and transmission system that delivers gas to the Mobile Bay plant with design capacity of 1 Bcf/d. New production by the end of 2015 is expected to add 70 MMcf/d on an exit-rate basis; and

67% interest in the Main Pass Oil Gathering System, with a design capacity of 160,000 b/d. Minority owner Panther Midstream is operator.

"Drilling and permitting activity in this region of the Gulf continues to increase after the end of the drilling moratorium, and we are well positioned to capture incremental volume," Bergstrom said.

Because the acquisition is accretive, management intends to recommend a 3-5% increase to quarterly distribution in 4Q2014. The transaction is expected to be funded with American Midstream common units.

Based on the purchase, American Midstream updated its 2014 forecast with adjusted earnings to a range of $44 million to $47 million, and distributable cash flow of $24-27 million. Forecasted growth capital expenditures in 2014, which exclude capital for maintenance, were updated to $65-70 million to account for accelerated capital costs to accommodate faster drilling and higher throughput for the producer customer on the Lavaca gas gathering system that is under construction.

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